What Is Replacement Cost?
The amount needed to repair or replace damaged property with new property of like kind and quality, without a deduction for depreciation. It typically pays more than actual cash value.
Replacement Cost across 3 exams
Replacement Cost appears on the following exams. Each defines it in the context candidates are tested on:
- Property & Casualty
- The amount needed to repair or replace damaged property with new property of like kind and quality, without a deduction for depreciation. It typically pays more than actual cash value.
- All-Lines Adjuster
- The cost to replace damaged or destroyed property with new property of similar kind and quality at current market prices. This is often distinguished from Actual Cash Value (ACV), which deducts for depreciation. Many property policies cover replacement cost, making this valuation method critical for accurate claim settlement.
- Personal Lines
- A loss-settlement method that pays to repair or replace damaged property with new property of like kind and quality, without subtracting for depreciation. It generally provides broader recovery than actual cash value.